Ten-Year Insolvency Trends in Canada 2007-2016

Table of contents

• Overview
• About the OSB
• Insolvency Trends in Canada
  • Insolvency Volumes
    • Total Insolvency Volumes
    • Consumer Insolvency Volumes
    • Business Insolvency Volumes
• Insolvency Rates
  • Consumer Insolvency Rates
  • Business Insolvency Rates
• Demographic Overviews
  • Consumers
    • Age
    • Gender
  • Businesses
    • North American Industry Classification System Code
• Financial Overview
  • Assets and Liabilities of Insolvent Consumers
  • Assets and Liabilities of Insolvent Businesses
• Annex A – Consumer and Business Insolvency Volumes by Province and Territory
• Annex B – Consumer and Business Insolvency Rates by Province and Territory
• Annex C – Insolvency Volumes and Rates by Province and Territory
• Annex D – Insolvency Volumes by Age, Gender and Industry Sector
• Annex E – Consumer and Business Declared Assets and Liabilities
• Annex F – Glossary

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Overview

Insolvency volumes in Canada increased during the 2007–2016 period, from 108,905 in 2007 to 129,727 in 2016. Volumes were noticeably affected by the 2008–09 recession, during which they peaked at 158,441.

The structure of insolvency volumes changed during the 2007–2016 period. The two insolvency options that form total volumes, a bankruptcy and a proposal, evolved in opposite directions. While the number of proposal filings increased, the number of bankruptcy filings decreased. Consumer insolvency filings, which represent the majority of insolvency volumes in Canada (97% in 2016), are the main driver behind these trends.

Insolvency volumes vary across the country, reflecting each province's economic and demographic profiles.

Consumer insolvency rates, defined as the number of consumer insolvencies per thousand Canadian residents aged 18 years and older, recorded a slight increase during this period, going from 3.9 in 2007 to 4.4 in 2016.

The demographics of insolvent consumers did not significantly change over the 2007–2016 period. Insolvent consumers in the age brackets of 25 to 44 years old and 45 to 64 years old continued to represent the majority of all consumer insolvency filings, with 85.8% of the total in 2016. The share of these two age brackets in the Canadian population aged 18 years and older hovers around 70%.

Slightly more males than females filed for insolvency throughout the period, a trend consistent for both bankruptcy and proposal filings.

The sectoral structure of business insolvency was fairly stable during this period, with the top five industry sectors remaining unchanged and consistently representing approximately 60% of all business insolvency filings. These sectors are Construction; Manufacturing; Retail Trade; Transportation and Warehousing; and Accommodation and Food Services. Businesses in these five sectors accounted for 25% of all Canadian businesses in 2016, a drop of almost 10 percentage points from the 34% recorded in 2007.

For all consumer insolvency filings, declared assets and liabilities increased during the 2008–09 recession and decreased afterwards. The assets/liabilities deficit followed a similar trend. For proposals filed by consumers, the trend was quite different, as declared assets and liabilities increased throughout the 2007–2016 period and the assets/liabilities deficit was significantly smaller, compared to consumer bankruptcies.

For all business insolvency filings and excluding 2016, declared assets and liabilities decreased after the recession of 2008–09 and slightly increased during the 2012–2016 period. Declared assets were notably smaller than declared liabilities, resulting in significant assets/liabilities deficits throughout the period.

About the OSB

The Office of the Superintendent of Bankruptcy (OSB) is responsible for supervising all estates and matters to which the Bankruptcy and Insolvency Act (BIA) applies, as well as certain matters under the Companies and Creditors Arrangement Act (CCAA).

The OSB licenses and regulates the insolvency profession; supervises the administration of estates in bankruptcy, commercial reorganizations, consumer proposals and receiverships; maintains a public record of BIA and CCAA filings; records and investigates complaints from debtors and creditors regarding the insolvency process; and ensures compliance through maintenance and enforcement of the regulatory framework.

The OSB proactively disseminates insolvency statistics through a variety of channels, such as monthly, quarterly and annual insolvency statistics reports, and annual insolvency rates reports. Insolvency statistics are also found on Canada's Open Government web portal.

Insolvency Trends in Canada

Insolvency Volumes

Total insolvency volumes

Total insolvency volumes in Canada include bankruptcies and proposals filed by consumers or businesses. A business is defined as any commercial entity or organization other than an individual, or an individual who has incurred 50% or more of total liabilities as a result of operating a business.

Total insolvency volumes increased by a compound annual rate of 1.9%, from 108,905 in 2007 to 129.727 in 2016, with a peak of 158,441 in 2009. Bankruptcies decreased by 2.8% per year, from 86,140 in 2007 to 66,256 in 2016. Proposals, however, increased by 12.1% per year, from 22,765 in 2007 to 63,471 in 2016 (Figure 1).

In 2007, bankruptcies accounted for 79% of total insolvency volumes. This percentage decreased throughout the years, dropping to 51% in 2016. In contrast, the volume and percentage of proposals increased during this period, representing 49% of total insolvencies in 2016.

Consumer insolvency volumes

Consumer insolvency filings represent the majority of insolvency filings in Canada (97% in 2016) and are the trendsetter for total insolvency volumes. They increased by 2.4% per year, from 101,293 in 2007 to 125,878 in 2016, with a peak of 151,712 in 2009.

Consumer proposals increased proportionally and in volumes while consumer bankruptcies experienced the opposite (Figure 2).

Business insolvency volumes

Business insolvency volumes, a small portion of total insolvency volumes, decreased by 7.3% per year, from 7,612 in 2007 to 3,849 in 2016. Both business bankruptcies and business proposals decreased during this period, with proposals falling at a slower pace (Figure 3).

Insolvency Rates

Insolvency rates are calculated as the number of insolvencies per thousand. They are calculated for consumers and businesses, overall, and for bankruptcies and proposals.

Consumer insolvency rates

About 4 out of 1,000 Canadian residents aged 18 years and older filed for consumer insolvency every year during the 2007–2016 period (Figure 4).

There was a noticeable increase in this number during the 2008–09 recession to around 6 and a gradual decrease afterwards to pre-recession levels.

The number of Canadian residents filing a consumer proposal gradually increased from 0.8 per thousand in 2007 to 2.2 per thousand in 2016. The reverse trend was observed for bankruptcies.

Business insolvency rates

The number of businesses filing for insolvency per thousand was on a downward trend during the 2007–2016 period (Figure 5).

It declined from around 3 businesses per thousand in 2007 to 1 business per thousand in 2016. The number of businesses filing for bankruptcy per thousand declined at a faster pace than the number of businesses filing a proposal per thousand.

Demographic Overviews

This section includes trends of insolvent consumers by age and gender; and trends of insolvent businesses by North American Industry Classification System.

Consumers

Age

The age of insolvent consumers is collected at the time of filing. For the trend analysis, insolvent consumers are grouped into four age groups: "18 to 24 years," "25 to 44 years," "45 to 64 years," and "65 years and older." Also considered in the analysis is a comparison of each age group's share of insolvent consumers to its share of the Canadian population aged 18 years and older.

Overall, age groups "25 to 44 years" and "45 to 64 years" account for 85.8% of all insolvent consumers, while their share of the Canadian population is about 70%.

18 to 24 years old

About 6,000 Canadian residents aged 18 to 24 filed for insolvency in 2007, a number that grew during the recession but gradually decreased to around 4,200 in 2016 (Figure 6).

Bankruptcy was by far the primary choice of insolvent Canadian residents in this age group in 2007, although the gap between bankruptcies and proposals grew smaller during the following years.

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This age group's share of all insolvent consumers decreased from about 6% in 2007 to 3% in 2016 (Figure 7). However, its share of the Canadian population aged 18 years and older was steady at about 12%.

25 to 44 years old

About 53,000 Canadian residents aged 25 to 44 filed for insolvency in 2007, a number that grew during the recession but gradually decreased afterwards. It settled at around 57,000 in 2016, about 7.5% higher than in 2007 (Figure 8).

Bankruptcy was the primary choice of insolvent Canadian residents in this age group in 2007. However, by 2016, proposals were slightly more prevalent than bankruptcies.

This age group's share of all insolvent consumers decreased from 52% in 2007 to 45% in 2016 (Figure 9). Its share of the Canadian population aged 18 years and older was stable at about one third.

45 to 64 years old

About 36,000 Canadian residents aged 45 to 64 filed for insolvency in 2007, a number that grew during the recession and stayed flat at around 51,000 (Figure 10).

Bankruptcy was the primary choice of insolvent Canadian residents in this age group in 2007. However, by 2016, their choice was split in half between proposals and bankruptcies.

This age group's share of all insolvent consumers increased from 36% in 2007 to 41% in 2016 (Figure 11). Its share of the Canadian population aged 18 years and older was stable at about one third.

65 years and older

About 6,600 Canadian residents aged 65 and older filed for insolvency in 2007, a number that grew during the recession and reached 14,000 in 2016 (Figure 12).

Bankruptcy was by far the primary choice of insolvent Canadian residents in this age group in 2007. However, by 2016, the gap between bankruptcies and proposals grew somewhat smaller.

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This age group's share of all insolvent consumers increased from 6% in 2007 to 11% in 2016 (Figure 13). Its share of the Canadian population aged 18 years and older also grew from about 17% in 2007 to 20% in 2016.

Gender

The distribution of insolvent consumers by gender was fairly stable over the 2007–2016 period. Males' share of the total (53% in 2016) was slightly higher than females (47% in 2016), while their share of the Canadian population was historically lower than females. It was about 49.6% in 2016 (Figure 14).

The distributions of consumer bankruptcies and proposals by gender are included in Figures 15 and 16. They are very similar to the overall distribution. In 2016, males represented 53% of consumer bankruptcies and 53% of consumer proposals.

Businesses

North American Industry Classification System Code

The North American Industry Classification System (NAICS) has twenty business sectors. This section focuses on the top five NAICS sectors based on the highest insolvency volumes. These top five sectors are Construction, Manufacturing, Retail Trade, Transportation and Warehousing, and Accommodation and Food Service. Together they represent about 60% of all business insolvencies throughout the period. The share of these sectors in all Canadian businesses decreased from 34% in 2007 to 25% in 2016.

Construction

The number of businesses that filed for insolvency in the construction sector was on a downward trend during the 2007–2016 period. The number dropped from close to 1,300 in 2007 to around 700 in 2016 (Figure 17).

This sector's share of insolvent Canadian businesses was stable at around 18% during the 2007–2016 period. Its share of all Canadian businesses is about 10% (Figure 18).

Manufacturing

The number of businesses that filed for insolvency in the manufacturing sector was on a downward trend during the 2007–2016 period. The number dropped from close to 800 in 2007 to around 300 in 2016 (Figure 19).

This sector's share of insolvent Canadian businesses increased during the recession but ended the period at 8%, almost 2 percentage points lower than its starting level of 10%. Its share of all Canadian businesses hovers around 3% (Figure 20).

Retail Trade

The number of businesses that filed for insolvency in the retail trade sector was on a downward trend during the 2007–2016 period. The number dropped from close to 1,100 in 2007 to around 450 in 2016 (Figure 21).

This sector's share of insolvent Canadian businesses dropped from 14% in 2007 to 12% in 2016. Its share of all Canadian businesses decreased to around 6% in 2016 (Figure 22).

Transportation and Warehousing

The number of businesses that filed for insolvency in the transportation and warehousing sector increased during the recession and dropped significantly afterwards to settle around 220 (Figure 23).

This sector's share of insolvent Canadian businesses increased during the recession from 9% to 11% and dropped to 6% in 2016. Its share of all Canadian businesses hovers around 5% (Figure 24).

Accommodation and Food Services

The number of businesses that filed for insolvency in the accommodation and food services sector was on a downward trend during the 2007–2016 period. The number dropped from close to 900 in 2007 to around 640 in 2010 and stayed flat afterwards (Figure 25).

This sector's share of total insolvent Canadian businesses increased from 11% in 2007 to 16% in 2016. Its share of all Canadian businesses hovers around 3% to 4% (Figure 26).

Financial Overview

This section presents trends of assets and liabilities declared at the time of filing of insolvent consumers and businesses. It also presents trends of the assets/liabilities deficit position of insolvent consumers and businesses.

Assets and liabilities of insolvent consumers

Overall, declared assets by insolvent consumers increased during the 2007–2016 period, from $4.3 billion in 2007 to $10.8 billion in 2016. Declared liabilities followed a similar trend, increasing from $7.5 billion to $15 billion, with a peak of $16.7 billion in 2009 (Figure 27).

The assets/liabilities deficit position of insolvent consumers increased during the 2008–09 recession reaching $6 billion, but decreased afterwards to pre-recession levels.

For consumers who filed a bankruptcy, declared assets and liabilities followed a similar trend as overall consumers (Figure 28). Their assets/liabilities deficit position increased during the 2009 recession reaching $6 billion and decreased afterwards to $4 billion, about $1 billion higher than in 2007.

For consumers who filed a proposal, declared assets and liabilities steadily increased during this period (Figure 29). Declared assets increased from $1.7 billion in 2007 to $7.2 billion in 2016, while declared liabilities increased from $1.9 billion in 2007 to $7.5 billion in 2016. Their assets/liabilities deficit position was very small throughout the period, compared to consumers who filed a bankruptcy.

Assets and liabilities of insolvent businesses

Overall, trends of declared assets and liabilities by insolvent businesses are more volatile. A small number of large business insolvency filings have a disproportionate effect on overall values and may cause significant swings from year to year. This is exemplified in the $17 billion liabilities figure of 2016, originating from a small number of business filings.

In aggregate, declared assets by insolvent businesses fluctuated between $681 million and $2.1 billion during the 2007–2016 period. Excluding 2016, declared liabilities decreased after the 2008–09 recession and remained somewhat flat at around $5 billion. The large value of liabilities compared to assets resulted in large assets/liabilities deficits (Figure 30).

In aggregate, declared assets by insolvent businesses that filed a bankruptcy were much smaller than declared liabilities, which resulted in large assets/liabilities deficits. Declared assets fluctuated between $478 million and $1.8 billion. Excluding 2016, declared liabilities decreased after the 2008–09 recession to around $3 billion in 2012 and regained a slight upward trend during the 2013–2015 period (Figure 31).

In aggregate, declared assets by insolvent businesses that filed a proposal were also much smaller than declared liabilities, which resulted in large assets/liabilities deficits. They fluctuated between $103 million and $320 million. Declared liabilities were flat at around $1.4 billion with the exception of 2007 and 2014 (Figure 32).

Annex A: Consumer and Business Insolvency Volumes by Province and Territory

Consumer Volumes

Business Volumes

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Annex B – Consumer and Business Insolvency Rates by Province and Territory

Consumer Insolvency Rates

Business Insolvency Rates

Annex C – Insolvency Volumes and Rates by Province and Territory

Source: Office of the Superintendent of Bankruptcy

Source: Office of the Superintendent of Bankruptcy

Source: Office of the Superintendent of Bankruptcy

Source: Office of the Superintendent of Bankruptcy
Consumer insolvency rates are defined as the number of insolvent consumers per 1,000 Canadian residents.

Source: Office of the Superintendent of Bankruptcy
Business insolvency rates are defined as the number of insolvent businesses per 1,000 Canadian businesses.

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Annex D – Insolvency Volumes by Age, Gender and Industry Sector

Source: Office of the Superintendent of Bankruptcy
*A few files have missing date of birth which results in files with missing age.

Source: Office of the Superintendent of Bankruptcy

Source: CANSIM Table 051-0001

Source: CANSIM Table 051-0001

Source: Office of the Superintendent of Bankruptcy

Source: Office of the Superintendent of Bankruptcy

Source: Statistics Canada (Custom request)

Source: Statistics Canada (Custom request)

Source: Office of the Superintendent of Bankruptcy
*A few files have missing gender

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Annex E – Consumer and Business Declared Assets and Liabilities

Source: Office of the Superintendent of Bankruptcy

Source: Office of the Superintendent of Bankruptcy
* A small number of business filings account for the jump in business liabilities witnessed in 2016.

Annex F – Glossary

Bankruptcy:

The state of a consumer or a business that has made an assignment in bankruptcy or against whom a bankruptcy order has been made.

Business:

Any commercial entity or organization other than an individual, or an individual who has incurred 50 percent or more of total liabilities as a result of operating a business.

Consumer:

An individual with more than 50 percent of total liabilities related to consumer goods and services.

Insolvency:

In the context of this report, a bankruptcy or a proposal.

North American Industry Classification System (NAICS):

System that classifies economic units that have similar production processes in the same industry. This is a supply-based or production-oriented economic concept.

Proposal:

An offer to creditors to settle debts under conditions other than existing terms. A proposal is a formal agreement under the Bankruptcy and Insolvency Act.